‘Tis the climate change proxie season

image_asset_11083Newsflash:  A new report by a G20 task force chaired by Michael Bloomberg advises companies to routinely include climate risk information in their financial filings.  Its rationale?  “Increased disclosure in financial filings on climate risks—ranging from physical risks from impacts to liability risks from oil and gas holdings—will trigger oversight and institutionalize the need to consider climate change.”

A new study shows that corporate shareholders have filed more climate change resolutions with publicly held U.S. companies this year than in past years.

Proxy Review 2016 reports that by mid-February, investors had submitted 370 resolutions focused on environmental or social issues. Over 90 resolutions specifically addressed mitigating GHG emissions  and increasing renewable energy.

Public companies must hold annual shareholder meetings where management updates investors on the upcoming year’s plans and business strategies.  These meetings mostly occur between April and June. At them, shareholders may also vote on resolutions that affect company practices and policies.  If investors meet basic requirements (mostly around share ownership), they may submit resolutions to be voted on at stockholder meetings.  Companies usually oppose them and may petition the Securities and Exchange Commission (SEC) to even block them.stranded assets

Mary Beth Gallagher of the Tri-State Coalition for Responsible Investment has filed resolutions at Chevron, Exxon Mobil, and the utility Southern Co. “We want to understand their business strategy to remain competitive in a 2-degree world,” she said in an interview with ClimateWire. Shareholders have presented similar proposals to Devon Energy, Occidental Petroleum, Noble Energy, and the multinational utility AES.

Six proposals focus on “stranded asset” or “carbon bubble” risks, said Michael Passoff, CEO of Proxy Impact, the group that published the report, and one of its authors.  Other resolutions ask for information about links between hydraulic fracturing and earthquakes in the United States, links between sustainability and executive compensation, board diversity, and the connections between corporate spending and lobbying against climate regulations.

carbon bubbleThis level of shareholder wariness matches the mood of some fund managers. Norway’s $900 billion national pension fund divested of coal last summer, citing financial risks. The California State Teachers’ Retirement System, the second-largest pension fund in the United States, with $186 billion in assets, divested stocks of U.S. coal companies. In December, the $180 billion New York State Common Retirement Fund filed a shareholder resolution with Exxon seeking an explanation by 2017 of how it would run its business in a low-carbon world.  “We need to know that companies like Exxon are prepared to meet this challenge and are taking steps to protect the long-term value of our investments,” said fund trusteeThomas DiNapoli.

Scott Stringer, New York City’s comptroller, is responsible for $160 billion in city pension assets.  He filed 75 proxy proposals in 2014 that were intended to give shareholders the right to nominate candidates for corporate boards. Stringer devised this strategy, called the Boardroom Accountability Project, to address what he sees as long-term investment hazards: board diversity, excessive CEO pay, and climate change.  “As long-term shareowners, it is essential that we have climate-competent directors at fossil fuel companies — especially in light of the Paris Agreement reached last December.  Proxy access gives investors a real tool to engage boards more effectively, and hold them accountable if they are unwilling or ill-equipped to oversee the company’s transition to a low-carbon economy,” Stringer said. The Project is targeting 20 fossil fuel companies this year.

exxon HQJust this week, the SEC rejected Exxon’s attempt to block a shareholder resolution proposed by an investor coalition led by Comptroller DiNapoli and the Church of England (that includes Vermont’s State Employees’ Retirement System!).  This resolution asks the world’s largest publicly traded oil producer to explain how climate change and the regulation of it may affect its profitability.  Exxon had argued to the SEC that the proposal was too vague and that its current disclosures were adequate.  (Chevron received the same reply from the SEC last week.) As DiNapoli observes, “The Securities and Exchange Commission’s determination upholds shareholders’ rights to ask for vital information. Investors need to know if Exxon Mobil is taking necessary steps to prepare for a lower-carbon future.”